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Glossary

The trading terms that decide P&L, in plain English

Every term you will encounter on a trading floor, defined plainly. Where a full explainer exists, the card links straight to it. Written from twelve years of delivering trading systems, not from a textbook.

Prefer these organised by the decisions they sit behind? Read the Commodity Desk Handbook.

ABCDEFGHIJKLMNOPQRSTUVWXYZ
A
Algo Trading
Using computer programs to place and manage orders automatically based on rules, from simple execution slicing to fully automated strategies.
API (crude grade)
A scale for how light or heavy a crude oil is. Higher API means lighter crude, which is usually easier to refine into valuable products.
B
Backwardation
A downward-sloping forward curve: futures trade below spot because the market is paying a premium for the commodity now, a classic scarcity signal.
Contango vs Backwardation: What the Curve Tells You
Basis Risk
The gap between the price of what you actually own and the instrument you hedged it with. You hedged, prices moved your way, and you still lost money.
Basis Risk in Commodity Hedging
C
Commodity Risk
The risk that moves in commodity prices (oil, metals, grain, power) hurt your position or business before you can react.
Contango
An upward-sloping forward curve: futures trade above spot, so the market effectively pays you to store the commodity and deliver it later.
Contango vs Backwardation: What the Curve Tells You
Counterparty Risk
The risk that the other side of your trade fails to pay or deliver. You can be right on the market and still lose because they defaulted.
Crack Spread
The margin a refinery earns turning crude oil into products like petrol and diesel, traded as the price gap between crude and product futures.
CTRM (Commodity Trading & Risk Management)
The broader category: everything ETRM does, extended across physical commodities like metals and agriculture, with deeper logistics, inventory, and quality functionality.
ETRM vs CTRM: What's the Difference?
D
Demurrage
The penalty a charterer pays when loading or discharging a vessel runs past the agreed laytime, or when a container occupies the terminal beyond its free days.
What Is Demurrage vs Detention? A Plain-English Guide
Detention
The charge for holding a carrier's equipment outside the terminal, typically a container that left the port but was not returned empty on time.
What Is Demurrage vs Detention? A Plain-English Guide
E
ETRM (Energy Trading & Risk Management)
Software that manages the trading lifecycle for energy commodities: power, natural gas, oil, and increasingly carbon and renewables certificates.
ETRM vs CTRM: What's the Difference?
F
FPSO
A Floating Production, Storage and Offloading vessel, a ship that produces oil at sea, stores it onboard, and offloads it to tankers.
Freight Differential
The price adjustment for what it costs to ship a commodity between locations, the reason the same barrel is worth different amounts in different ports.
Freight Visibility
The ability to know, in real time, where cargo is, what condition it is in, and when it will actually arrive, not what a schedule claimed a week ago.
Freight Management & Tracking Visibility
I
ISDA
The International Swaps and Derivatives Association, best known for the ISDA Master Agreement, the standard legal contract behind most over-the-counter derivatives.
L
Laytime
The period a charterparty grants to load or discharge cargo before demurrage begins to accrue. The clock that decides whether a voyage ends in a penalty or a despatch credit.
What Is Laytime in Shipping? The Clock That Decides Demurrage
M
Machine Learning in Trading
Using models that learn patterns from data to drive signals, forecasts, or execution, instead of hand-coding every rule up front.
Mark-to-Market
Revaluing a position at today's market price instead of the price you paid, so the books always show what it is actually worth right now.
N
Netback
Working a cargo's value backwards from the delivered price, subtracting freight, insurance, and handling until you reach what it is worth at the wellhead or mine gate.
What Is a Netback? Netback vs Netforward
Nomination
The formal notice naming the vessel, quantity, and dates for a physical delivery, telling the other side exactly how the cargo will move.
P
P&L
Profit and Loss, the running score of how much a trade, book, or desk has made or lost over a period.
Position Limit
A cap on how large a trader's or firm's position may grow, set by exchanges, regulators, or internal risk teams to contain potential damage.
Power Trading Desk
A desk that buys and sells electricity across day-ahead, intraday, and balancing markets, managing generation, load, and grid constraints on hourly or faster clocks.
Delivering a Power Trading Desk
S
Scheduling
Planning the physical movement of cargoes and deliveries, which vessel, which berth, which dates, so paper contracts turn into actual flows.
T
TC/RC (Treatment & Refining Charges)
The fees a smelter charges a miner or trader for converting raw concentrate into refined metal, and a barometer for the balance of power between mines and smelters.
What Does TC/RC Mean in Metals Trading?
V
VaR
Value at Risk, an estimate of the most a portfolio could lose over a set period at a given confidence level. A standard yardstick for desk risk.
Y
Yield Curve Inversion
When short-term government bond yields rise above long-term yields, most commonly the 2-year Treasury paying more than the 10-year. A recession signal with direction, not timing.
Reading the Yield Curve Like a Trader, Not a Tourist

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